Rent To Own done ethically

Parents: Passing on bad habits to your kids?

credit cards for BRTO blog

I just attended a presentation by Kevin Cochrane, co-founder of enRiched Academy, an organization that has created a program to teach teenagers and 20-somethings how to manage credit, avoid debt and build wealth. Why did they do that? Because an astonishing number of kids and early adults create a deep financial hole for themselves by the time they’re in their mid-twenties. Cochrane provides his own real-life example as a cautionary tale.

Is it really a surprise that kids don’t know much about how to handle money and, more importantly, how to manage easy access to credit? The answer is a categorical no. Many kids don’t know how to handle credit because many parents don’t know how to handle credit. How can we pass on skills to our kids that we have not yet mastered ourselves?

So how are adults in Canada doing? A quick look at the statistics tells us we have much to learn. Debt is a big issue for many Canadian families. According to Statistics Canada, household debt has risen to 163 percent of disposable income as of this writing. That means that for every dollar earned in an average Canadian household, there is $1.63 of debt. This article gives an overview of the fact that the average non-mortgage consumer debt in Canada has risen to $26,700 according to TransUnion.

Staggering numbers

One of the biggest culprits that we see in our Rent to Own business is the overuse and misuse of credit cards. Cochrane did a great job of addressing this very issue with his target audience at the presentation that I attended. He pulled out a credit card bill and broke it down in ways that few probably ever stop to consider.

Just for the fun of it, I came home and pulled out a credit card statement to see what I could find out. We pay off our cards in full every month within the grace period so interest charges are not a concern in our case, but what if we didn’t? What would it cost us if we just made minimum payments? The balance on the particular card in question was $7,056.42. If we make a minimum payment on time, the interest rate charged to us is apparently a preferred rate of 19.75%. (I’m not sure who exactly prefers that rate.) If however we do not make the minimum payment in time, then we are charged the “standard” rate of 23.99% on the whole amount owing. That’s a huge amount of interest to pay on an ongoing basis.

Perhaps the most revealing line is the bit about “Payment Period Remaining”. This is where credit card companies are now required to let you know how long it would take to pay off your bill if you continued to make minimum payments without ever incurring another dollar of expenditures. You might want to sit down for this one: My $7,056.42 would take 21 years and 7 months to pay off! Don’t forget that during that time I will be charged somewhere between 19.75% and 23.99% interest on a monthly basis. The amount of interest charged will be roughly double the cost of the original expenditures.

A tool, not a crutch

We say this to our Rent to Own clients all the time and I will reiterate it now for the general public: Do not carry a balance on your credit cards. Teach your children not to carry a balance on their credit cards. If you do, it will literally cost you a fortune and rob you of a lot of future purchasing power. If you’ve come to depend on your credit cards to make your monthly cash flow work and you feel that you need to run a balance, then you need to rethink your expenditures.

Just to be clear, I’m not saying that credit cards are bad. On the contrary, they’re an essential tool in our business as we help families with credit challenges rebuild their credit profile. However, we teach our clients to use the cards to help build back their Beacon scores but to ensure that they pay them off in full every month. It occasionally takes time to get our clients to the point where they can do that but the goal always remains the same: Use the cards as a tool, not a crutch.

So if your credit situation is less than ideal I recommend that you take a look at enRiched Academy’s program. Buy it for your kids and follow their good example as they build their financial literacy skills.



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  1. Pingback: Insurance you should ignore

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